The Most Common Questions About Car Financing





Many of us wish there had been a mandatory class in high school that taught you how to do real-world “adult” things - how to rent an apartment, where to register to vote, or strategies for budgeting money.


One of the biggest adult decisions you make in your life is purchasing a car, and it’s another one of the things you don’t get specifically taught while growing up before you’re expected to actually do it. Luckily, you don’t have to do it alone.


Whether you’re buying or leasing a car, there are hundreds of resources to help, including our team here at Mel Rapton Honda!


Here to Help


Plenty of experts out there have worked hard to understand the automotive industry and can walk you through the process, and loan professionals are available to explain payment options.


At Mel Rapton Honda, we get tons of questions about car financing from people all over the Sacramento area, so we decided to make a list of the top 5 most common ones.


5 Most Common Questions About Car Financing

Feel free to read over these questions and some of our answers, then reach out to us if there’s anything else we can clear up about the financing process.


    • What does financing mean?


The obvious first question is, what does financing actually mean? If you’re new to the process of purchasing or leasing a car, let’s do a quick overview of how it works. If you’re borrowing money to buy a car, then you’re financing it.


When you get a car, you can either lease it month to month or buy it with a loan paid back over time. Leasing is basically like renting the car because you have to give it back when the lease is up. This can be an affordable option for people who don’t drive as much, since there are occasional charges for going over an agreed-upon mileage amount. Buying the car by paying back a loan means that it’s permanently yours once everything’s paid in full.

    • How high does my credit score need to be in order to qualify for a loan?


The higher your credit score, the lower the APR options you will probably be offered. That means you can have lower interest rates because the bank knows you’ll pay it back. There are programs for people with struggling credit scores, so definitely check into some credit score boosts before calculating rates to get the best deal.


Car dealerships work with different third-party lenders to help with the loan process if you want to go with the permanent ownership route. We work with highly qualified individuals who will get you the best deal and make sure you leave feeling comfortable and satisfied. The last thing we want our Mel Rapton Honda customers to feel is anxiety about purchasing a car - let us make sure you get the care and support you need to make this a great experience!

    • What is a down payment? What if I can’t afford much starting out?


Most of us aren’t walking around with $100 bills in our pockets, and we know that cars are expensive. Loans and payment options exist to help people afford the car they want without feeling too much pressure to pay it all right away.


A down payment is the very first chunk of money you’re willing to put toward the end amount. Once you pay this, then the calculation of the monthly payment amount comes from whatever’s left. This is important because the higher your down payment is upfront, the less you’ll have in interest payments later.

    • What is interest? How do I know which interest rate is best and which lender to go with?


Speaking of interest, let’s talk through what it means (and what it doesn’t mean). When you make a down payment, then you have to calculate the rest of the payments to get you back up to even. Since they are giving you the car and loaning you the money for it, though, the bank needs to be paid more for their service. This is called interest.



Interest depends on your loan terms. If you want more time to pay all of the money back for the car, then you will need to pay more overall. Think of it as an extra charge for getting to have the car before you can pay for all of it. Look at more than just your monthly fees, though - calculate how much you’ll actually have paid by the end of the lease / loan and take that into account as well.


Different lenders charge different fees, which means you have to do your research for your particular situation to see which one is the most feasible for you. Some lenders offer certain deals or incentives, so look through their options thoroughly before making any final decisions. Think through how much you want to be paying every month and stick to it. Don’t forget about the extra that you’ll be spending overall when choosing a price point for your car.


    • Now that I have an idea of what financing is, where do I start with finding the right car for my family and me?


Glad you asked! A great place to start your financing journey is with some shopping around online to see what types of vehicles will fit into your price range.


Scrolling through Google can be a bit overwhelming, so try narrowing it down to a few types of cars and dealerships in your area and keep track of the pricing options you see. Set a picture in your head with parameters of a budget and a style. How much of your paycheck should you spend every month? Is it a dealbreaker to have the latest model? New or used?


Check out our car financing application to develop a couple of quotes - all you need to do is enter some basic information, tell us what you’re looking for, and find some personalized options! And when you’re ready to find the right car, Mel Rapton Honda is here to help you find your perfect vehicle.